Barclays CEO Diamond Becomes Political Target Over Libor

Barclays Plc Chief Executive Officer Robert Diamond. Marcus Agius today resigned as chairman in a bid to shield Diamond after the bank was fined a record 290 million pounds ($455 million) for rigging interest rates. Photographer: Jerome Favre/Bloomberg

June 29 (Bloomberg) -- In April 2010, Labour Business
Secretary Peter Mandelson called Barclays Plc’s then-President
Robert Diamond the “unacceptable face” of banking in a dispute
over his pay.

Now chief executive officer of Barclays, Britain’s second-biggest lender by assets, Diamond has become the target of the
Conservative-led coalition after the bank this week was fined
290 million pounds ($450 million) for attempting to manipulate
the inter-bank lending rate, known as Libor.

Prime Minister David Cameron yesterday called for
accountability to go “all the way to the top.” Liberal
Democrat Business Secretary Vince Cable raised the possibility
of disqualifying him as a director. And Parliament’s Treasury
Committee said it will summon Diamond, 60, to explain himself.

“Businesses and homeowners who have had their lives
trashed by the greed of Barclays should not expect just an
apology from Diamond but his resignation,” David Burrowes, a
Conservative lawmaker, said in an interview. “Enough is enough.
He should do the decent thing and go.”

Today’s newspapers urged Diamond to quit. “If he had an
ounce of shame, he would immediately step down,” the Financial
Times said. The Sun tabloid led on the story, telling him to
join the unemployment queue under the headline “Sign on, you
crazy Diamond.”

In a press conference today, Bank of England Governor
Mervyn King added his voice, calling for “a real change in the
culture of the industry” and “leadership of an unusually high
order.”

Effort Undermined

The scandal doesn’t just threaten Diamond’s job. It has
wiped out his efforts in 2011 to make the case for the finance
industry in the wake of the credit crunch that plunged much of
the world into recession. Instead, Parliament heard calls for
prosecutions of those involved in the latest revelations.

At the start of 2011, the Concord, Massachusetts-born
Diamond told a Treasury committee hearing that the country
needed to “put some of the blame game behind us,” saying that
the “period of remorse” for bankers “needs to be over.” In
November, he made a speech saying banks needed to “become
better and more effective citizens.”

In a letter to Andrew Tyrie, chairman of Parliament’s
Treasury Committee, yesterday, Diamond said he would “welcome
the opportunity to provide answers.”

Improving Controls

The CEO plans to highlight “what we have done and are
doing to put things right,” he said in the letter. “It is
clear that the control systems in place at the time were not
strong enough and should have been much better.”

For Cameron, the chance to beat up a financier may be
useful politically as he pushes through the deepest austerity
policies since World War II amid the U.K.’s first double-dip
recession since the 1970s.

Even before the Libor fine, the tide was moving against
bankers. In January, Cameron’s government announced it was
stripping former Royal Bank of Scotland Group Plc CEO Fred
Goodwin of his knighthood.

“The temptation for Cameron to come out all guns blazing
on this is huge,” Tim Bale, author of “The Conservative Party
from Thatcher to Cameron” and a professor of politics at Sussex
University, said in a telephone interview yesterday. “It’s an
economic story where, just for once, the government aren’t the
bad guys and it gives him a chance to show that the Tories don’t
always take the side of the rich and powerful.”

Investigators’ Conclusions

Investigators concluded this week that traders at Barclays
lied between 2005 and 2009 to make the bank appear secure during
the financial turmoil of 2008 and to make a profit, sometimes
colluding with workers in at least four other banks. At the
time, Diamond was running Barclays Capital, the division
implicated.

Barclays said this week that that Diamond and three other
executives will forgo their bonuses as a result of the Libor
scandal. According to his spokesman two days ago, Cameron’s
initial reaction was that it was a matter for regulators.

By yesterday morning, Cameron stepped up his rhetoric,
telling reporters in northern England that “the Barclays
management team have some big questions to answer” before
boarding a plane to Belgium to attend a European Union summit.

Ed Miliband, leader of the opposition Labour Party, went
further. “First, we need criminal prosecutions, we need the
full force of the law brought against those who have done wrong,
and if they are found guilty and if their offenses warrant it,
they should go to jail,” he told reporters in Brighton,
southern England.

Taking Responsibility

When Cameron arrived in Brussels, he further toughened his
message. “People have to take responsibility for the actions
and show how they’re going to be accountable for those
actions,” he said. “It’s very important that goes all the way
to the top of the organization.” A U.K. official, speaking on
condition of anonymity, later said the prime minister thought
Diamond specifically had questions to answer.

Diamond had little credit with British politicians to start
with. Two years ago Mandelson attacked him after reading reports
of his earnings in the Times. The bank subsequently challenged
the numbers. Mandelson said that Diamond got his money “not by
building business or adding value or creating long-term economic
strength. He has done so by deal-making and shuffling paper
around.”

Tax Plans

In February the Treasury closed down a series of Barclays
tax-avoidance plans. “They haven’t actually broken the law, but
they haven’t acted according to its spirit,” Minister David
Gauke said at the time.

Cable, Mandelson’s successor as business secretary, now
says the government could dismiss Diamond as a director if he
fails to provide adequate answers.

“There are last resort powers of director
disqualification,” Cable told lawmakers yesterday. “Many
hundreds a year are subject to that action and if the facts
suggested action -- and we would be subject to legal advice and
due process --indeed that could well follow. It is a sanction
available to us.”